Managed Accounts

cwelsh · November 18, 2013

MANAGED ACCOUNTS

Steady Options frequently receives questions from our members for assistance trading the strategies offered and discussed on the forums. The reasons a member might want such assistance can be many – from simply not having the time to fully trade the strategy to simply wanting to watch actual trades occur in real time for a while. Other people simply struggle to obtain the same fills that are listed on the site.

One of the more under-utilized options available to Steady Options’ members is access to managed accounts, which provide this exact service. We have learned that many members do not fully understand what a managed account is, how it works, how one is opened, the fees involved, and generally how they operate. Hopefully, the following FAQ answers these questions.

1. What is a managed account? / How do managed accounts work?

A managed account is a specialized investment advisory account that uses one particular strategy. It is an account you own, maintained through a custodian (such as TD Ameritrade Institutional or Interactive Brokers), that is managed by an investment advisor.

A typical Lorintine Capital client who utilizes a managed account typically has the following: (i) a retirement account, (ii) a traditional investment account, and (iii) a managed account (that trades the Anchor Strategy or Steady PutWrite or ETF BuyWrite). The account belongs to the client (unlike with a hedge fund, which owns the account) and the client gets a monthly or quarterly statement from both the broker and Lorintine Capital.

Managed accounts utilize “block trading,” which ensures all clients are equally treated. Let’s say there are 10 clients, each needs one contract on a trade. Instead of entering 10 different trades, one in each client account, only one trade is entered for all 10 contracts. The resulting sales price and commissions are then equally divided among all clients. That way all clients using a managed account get the same fill prices – which may not occur on 10 separate orders.

2. Why would I use a managed account?

The simplest answer is ease. Lorintine Capital is a licensed investment advisory firm. Lorintine runs some of the strategies discussed in these forums in managed accounts. It takes the burden of trading off of you by having the Firm make the trades and removes some of the potential margin of error. If you’re a “DIY” individual, who wants to have complete control over your account, you may still prefer to maintain your subscription and trade yourself.

3. Who owns the managed account? / Do I have access to the managed account?

One of the most important parts of a managed account is that you own it. This means you can log into the broker (e.g. TD Ameritrade Institutional or Interactive Brokers) and view your account at any time. You also have the ability to remove Lorintine Capital as the advisor on the account at your sole discretion at any time. While we don’t recommend this, as you may have open positions that need to be managed, it is your account, and you maintain control of the account.

The account will be in your name with statements sent to your address.

4. Who trades the managed accounts?

The account is traded by Lorintine Capital, a registered investment advisory firm. The strategies traded are traded by the same individuals that run the coordinating forums:

Anchor and Leveraged Anchor – Christopher Welsh

SteadyOptions strategy is not offered as part of managed accounts due to potential liquidity issues.

5. Do I receive statements on the managed account?

Yes, you will receive a monthly statement from TD Ameritrade Institutional or a quarterly statement from Interactive Brokers. You'll also have online account access to view the details about your account at anytime.

6. How can I close the managed account?

Your managed account can be closed at any time for any reason. We recommend that you close the account after discussing the matter with us, so we can ensure appropriate liquidation strategies minimize potential transaction costs. However, you can always close the account by directly contacting the broker.

7. How much do managed accounts cost?

Managed account fees vary by the strategy.

Anchor, Leveraged Anchor – 1.75% of total assets under management, taken monthly (1/12^th of 1.75% each month).

Fee discounts may be negotiated on an individual basis for larger accounts or those that open other advisory accounts with Lorintine Capital.

There are other fees that will be incurred on the account that go to the broker. Such fees including trading costs and commissions. Neither Lorintine Capital nor Steady Options receive any of such fees, soft dollars, or other “kickbacks” on the fees charged by the broker.

8. Do I get a discount at Steady Options if I have a managed account? / Do I have to maintain a subscription to Steady Options if I have a managed account?

In order to have a managed account, you must also maintain an account/membership with Steady Options. While Steady Options has a working relationship with Lorintine Capital, they are two separate businesses. Steady Options is not a registered investment advisor.

However, depending on your account size, discounts may be available.

If you place $100,000 or more into a managed account, you will be entitled to a 50% discount on Anchor Trades, monthly subscription fees.
If you place $200,000 or more into a managed account, you will be entitled to complimentary access to Anchor Trades.

9. How do I open a managed account? / What paper-work do I have to fill out?

Opening an account is simple. Contact Lorintine Capital at info@lorintinecapital.com or contact Christopher Welsh @cwelsh

The paper work comes in two forms:

A. An investment advisory agreement with Lorintine Capital. This is a contract between you and the Registered Investment Advisor. It gives Lorintine Capital permission to trade your account in the designated strategy, charge and collect fees, and provides the legal terms of the relationship; and

B. Accounting opening documents with the broker (TD Ameritrade Institutional or Interactive Brokers for Lorintine Capital managed accounts). They typically consist of a disclosure statement, account application, options and margin forms, and banking information.

10. What is the minimum size for a managed account?

Anchor Trades/Leveraged Anchor $50,000

11. I am not an accredited investor or qualified client, can I still use a managed account?

Yes.

12. I am not located in the United States, can I still use a managed account?

Possibly. If you are located in any European Union country, rules and regulations that went into effect at the beginning of 2019 essentially prohibit you from opening an investment advisory account individually in the United States. If you are in Canada, regulatory rules prohibit such investment. Other countries vary depending on their location.

However, this does not mean such investment is impossible. Rather you must:

A. Open a US based entity, typically a C-Corp;

B. Obtain a US tax identification number, called an EIN;

C. Maintain a registered agent in the United States; and

D. Have the company file an annual tax return with the IRS.

You may not have to file an individual tax return but discuss this with your tax professional. We realize most investors will not want to go through these hurdles. Also, it may not be financially prudent unless you have a larger account or have other accounts managed by Lorintine Capital, due to the expense of opening the entity and paying a US accountant to file your corporate taxes.

13. If I have questions about my managed account or opening one, who do I contact?

If you have any other questions regarding a managed account, please email Lorintine Capital at info@lorintinecapital.com.